AVGO Options Signal $400 Call Dominance: Here’s How to Ride the AI Mega-Cap Breakout

• AVGO surges 2.19% to $398.79, eyeing a 3rd straight week of gains
• Call open interest crushes puts at $400–$420 strikes ahead of Friday’s expiry
• UBS hikes price target to $472 on AI silicon demand, Microsoft chip rumors

Broadcom’s options market is screaming bullish. Call open interest at the $400 and $420 strikes dwarfs put activity, while technicals and news flow line up for a breakout. Let’s break down why this is a high-conviction trade—and where to draw the line.

Bullish Sentiment Locked in at $400–$420 Strikes

The options data tells a clear story: traders are betting big on AVGO’s upside. This Friday’s $400 call (AVGO20251212C400) has 5,325 open contracts, and the $420 call (AVGO20251212C420) adds 2,407. For next Friday, the $400 call (AVGO20251219C400) jumps to 8,944 OI, with the $410 call (AVGO20251219C410) at 6,432. That’s not just noise—it’s a wall of money expecting a push above $400.

The put/call ratio for open interest is 1.03, nearly balanced, but the heavy call skew at key strikes suggests smart money is hedging for a rally. Puts at $360 and $320 have decent OI, but they’re shadows compared to the call frenzy. If AVGO holds above $397.40 (intraday low), the $400 level becomes a psychological magnet—break that, and the $420 calls could ignite.

Microsoft Rumors and AI Hype Fuel the Fire

The news flow? A goldmine for AVGO. The rumor that Microsoft is shifting custom chip work from Marvell to Broadcom sent shares up 3.9% Monday. UBS’s $472 price target isn’t just a number—it’s a signal that AI silicon demand is accelerating. Broadcom’s Q3 AI revenue jumped 63% to $5.2B, and its Tomahawk 6 switches are now critical for hyperscalers like Google and Meta.

But here’s the catch: Microsoft’s contract with Marvell is still “solidly intact” per analysts. The market is pricing in potential, not certainty. That means AVGO’s rally hinges on follow-through—like a confirmed Microsoft deal or stronger-than-expected Q4 guidance (due Dec 11). For now, the stock is trading like a sure thing, but the 45x forward P/E leaves little room for error if execution falters.

Trade Setup: Calls at $400–$410, or a Bullish Call Spread

If you’re going long, the AVGO20251219C400 call is your best bet. With 8,944 OI and AVGO trading at $398.79, this strike is just 0.7% out of the money. A $405 close by Dec 19 would net ~12% on the call. For a safer play, consider a bull call spread: buy the $400 call and sell the $410 call to reduce cost. The max profit is $10/share if AVGO cracks $410.

For stock buyers, entry near $397.40 (intraday low) is ideal. A break above $407.285 (intraday high) would target $415–$420. Stop-loss below $390.24 (previous close) would protect against a reversal. The 200D moving average at $275 is a long-term floor, but short-term focus is on the $400–$420 corridor.

Volatility on the Horizon: Ride the AI Wave or Ride It Out

Broadcom is at a crossroads. The options market and news flow scream upside, but valuation risks loom. If Q4 revenue hits $17.4B as expected, the $400–$420 calls could be fireworks. But if Microsoft’s chip shift fizzles or AI demand softens, the stock could retest $365.25 (middle Bollinger Band).

For traders, the next 11 days are critical. AVGO’s options expiry on Dec 12 and earnings on Dec 11 will test conviction. For now, the $400 call wall and AI tailwinds make this a high-conviction setup—just keep an eye on that $390 support line.

Final Take: AVGO’s options, news, and technicals align for a bullish breakout. Play it with calls at $400–$410 or a stock entry near $397.40. But don’t ignore the risks—this is a high-octane trade in a high-flying stock.